Stress Testing your Retirement plan....have you??

OldMusicGuy

Thrugelmir wrote: »

Having spent 4 decades modelling spreadsheets for financial outputs. The one certainty that I have. Is that no sooner than you've finished an exercise. The data will already out of date. As the variable what if's will have changed.

Then you should know that's the point of scenario analysis. The underlying assumptions frequently do change (although so far I have been right on mine but I am less than one year in!), so even a simple best case/worst case/most likely case approach allows you to set up ranges of likely outcomes. This also helps identify the variables that have the biggest impact on your scenarios and those are what you track more closely.

If you have a flexible spreadsheet, you can simply change the variables to see what the outcome will be when your underlying assumptions change. I don't use any statistical forecasting techniques, my spreadsheet is really simple, but it only takes a few minutes to change any of the variables to get a revised plan. Which is how I've been able to do some stress testing and reassure myself I was ok to retire earlier than planned.

I update my "master plan" with actual data every month and revise the forecast accordingly. Maybe I spent too much of my life in corporate finance and accounting systems..... :rotfl:

GunJack

OldMusicGuy wrote: »

I update my "master plan" with actual data every month and revise the forecast accordingly. Maybe I spent too much of my life in corporate finance and accounting systems..... :rotfl:

So....you've not really "retired" yet then?? :rotfl:

OldMusicGuy

GunJack wrote: »

So....you've not really "retired" yet then?? :rotfl:

You can take the finance guy out of finance, but you can never take the spreadsheets out of a finance guy.....

Shedman

OldMusicGuy wrote: »

You can take the finance guy out of finance, but you can never take the spreadsheets out of a finance guy.....

Ha ha totally agree with that sentiment (from another ex Finance modeller). Still keeps the old grey cells active.

Sea_Shell

I've been playing around with Excel this afternoon, and devised a "prediction" spreadsheet, where I can input, current pot values, growth (or loss) forecast, annual spend, plus inflation forecast, and it spits out the numbers over 30+ years. DH will love it!!!! - I manage the money, but he's always asking me for the latest analysis of where we are.

It's a bit crude, and I'm sure some of you will have it split down further into asset classes, interest rates etc. but it's a starting point. (and saves having to go to on-line calculators each time I want to "test" figures)

marlot

Sea_Shell wrote: »

I've been playing around with Excel this afternoon, and devised a "prediction" spreadsheet, where I can input, current pot values, growth (or loss) forecast, annual spend, plus inflation forecast, and it spits out the numbers over 30+ years. DH will love it!!!! - I manage the money, but he's always asking me for the latest analysis of where we are.

It's a bit crude, and I'm sure some of you will have it split down further into asset classes, interest rates etc. but it's a starting point. (and saves having to go to on-line calculators each time I want to "test" figures)

Sounds good, and similar to mine.


After all, retirement is about balancing spend against life expectancy. If only I knew how many healthy years, poor health years, and care fees I'll need!

Flim

..the frightening bit is when you realise you have probably got too much and won’t be able to spend it all in time...

westv

marlot wrote: »

Sounds good, and similar to mine.


After all, retirement is about balancing spend against life expectancy. If only I knew how many healthy years, poor health years, and care fees I'll need!

A bit like a Dutch auction.

ffacoffipawb

Flim wrote: »

..the frightening bit is when you realise you have probably got too much and won’t be able to spend it all in time...

The markets are fixing this problem for you!!! :sad:

Audaxer

Flim wrote: »

..the frightening bit is when you realise you have probably got too much and won’t be able to spend it all in time...

That sounds like the least frightening bit. More frightening if you realise you've not got enough to last you through retirement.